Real Estate Finance

Question 1

Obligation

Answer 1

the borrower’s duty to repay a loan evidenced by a written promissory note or to perform other duties

Question 2

security

Answer 2

the borrower will provide security to the lender through a mortgage, deed of trust, or a similar encumbrance on the property

Question 3

foreclosure

Answer 3

if the borrower defaults on the obligation, the lender will have the property sold at a judicial foreclosure sale or a nonjudicial foreclosure sale and use the sale proceeds to satisfy the loan

Question 4

rights after foreclosure

Answer 4

the borrower and the lender may have additional rights after the foreclosure sale occurs

Question 5

right after foreclosure- protecting the borrower

Answer 5

setting aside the sale- sales price is so inadequate that it shocks the conscience or a procedural irregularity
- terms of a foreclosure sale are commercially reasonable- method, advertising, time, place, and terms objective standard

Question 6

rights after foreclosure- protecting the lender

Answer 6

deficiency judgment- if sale proceeds don’t fully repay the loan.

Question 7

Results of foreclosure sale - Principle 1

Answer 7

principle 1- TITLE- foreclosure eliminates/wipes out the mortgage being foreclosed and all junior interest but does not affect senior interest
* e.g., if L1 forecloses the buyer takes the title free and clear of all mortgages
* e.g., if L2 foreclosure sales proceeds are distributed first to the foreclosing lender and then to junior interest in order of priority-

Question 8

Results of foreclosure sale - Principle 2

Answer 8

principle 2- SALE PROCEEDS- foreclosure sales proceeds are distributed first to the foreclosing lender, and then to junior interest in order of priority any surplus proceeds go to the borrower
- if the senior interest ≠ initiate foreclosure, they receive none of the proceeds b/c the sale has no effect on the senior mortgage